NYT: Hulu Questions Count of Its Audience

Does Hulu, the Web’s most popular place for TV viewing, reach nine million people a month or 42 million?

Millions of dollars in advertising revenue may hinge on the answer. But no one seems to know for sure how big the site’s audience is.

Any way the streams of shows like “Fringe” and “30 Rock” are counted, it is clear that Hulu’s growth has been explosive, up 490 percent year over year, according to Nielsen Online. Hulu executives, however, are fretting that the company, one of the leading purveyors of ratings data, is undercounting the site’s visitors. They say Nielsen’s numbers hurt Hulu’s perception among advertisers and the press.

While Nielsen reported 8.9 million visitors to Hulu in March, another measurement firm, comScore, counted 42 million. Exacerbating the confusion, Nielsen’s numbers for April show Hulu losing audience while still managing to add video views, also known as streams.

The wildly divergent numbers demonstrate the nascency of the market for online video measurement. It’s “still the wild wild West,” said Rob Davis, a leader of the interactive video practice at OgilvyInteractive.

Given the growing importance of video advertising, the numbers are coming under more scrutiny. While video ads are only a tiny portion of online ad spending in the United States, the research firm eMarketer projects that they will account for more than a billion dollars of spending this year, up from $734 million last year.

“To the extent that the actual success is undercounted, it reduces confidence among advertisers to spend more dollars,” said Murgesh Navar, the founder of VoloMedia, an advertising firm that specializes in online and portable audio and video.

Web publishers are never entirely happy with the online ratings they receive from measurement companies. Their internal numbers, collected via clicks to their servers, are almost always higher than the third-party estimates. But the third-party figures act as the currency for promoting sites and selling ads, making them the lifeblood of the industry.

For Hulu, month-over-month growth is arguably the most important metric. The company, which was founded in late 2007 as a joint venture of NBC Universal, owned by General Electric and Vivendi, and the News Corporation, added the Walt Disney Company as an equity shareholder last month. Free, ad-supported episodes of ABC shows will soon be added to the lineup of NBC and Fox episodes.

In Hollywood, Hulu is seen as a possible solution to the fragmentation of TV viewing, because it allows fans to catch up on episodes they missed, as well as a potential problem for the broadcasting business model, because it may further erode traditional TV viewing over time.

“Broadcast still trumps online from a financial perspective,” Anne Sweeney, the president of the Disney-ABC Television Group, said in an interview last month. But she said online streaming “is additive and is growing.”

But how much is it growing? On Thursday, Nielsen Online said Hulu served up 373 million video streams in April, up from 348 million in March and 309 million in February. But Nielsen also said Hulu’s unique visitors had declined, from 9.5 million in February to 8.9 million in March to 7.4 million in April.

While Hulu did experience an immense spike in streams after it advertised during the Super Bowl in February, other measurement firms, like Quantcast, have not detected an equivalent drop in visitors. In e-mail exchanges with Nielsen this week obtained by The New York Times, Hulu staff members said they were frustrated by Nielsen’s extrapolation of the unique visitor number.

The staff members complained that reporters and media buyers frequently used the Nielsen data to describe the audience for Hulu, sometimes in negative ways.

Hulu declined to comment on the e-mail messages. But in a statement, Jean-Paul Colaco, the senior vice president for advertising at Hulu, said “there is more work that can be done with all of our research providers to ensure that online video metrics are accurately represented to users and clients.” Mr. Colaco said he was confident that Nielsen would continue to improve its measurement.

It is a pivotal time for Hulu. Analysts say the site has struggled to sell out its advertising inventory amid the rapid gains in traffic. Visitors often see public service announcements in place of paid advertisements when they watch episodes and short clips.

In addition to the advertising concerns, traffic data can also affect content owners’ decisions about whether to put more or less video online, he said. Nielsen counts video streams by using “beacons,” which inform the company whenever a video starts playing. But it counts visitors and provides demographic data by monitoring the Web use of about 200,000 panel members, whose online behavior and demographics are weighted. Dave Osborn, a senior vice president for Nielsen Online, said the company blended two separate panels: a large one that is recruited online and a smaller, more scientific panel of 20,000 that is recruited randomly and “which we believe better reflects the overall universe.”

Mr. Davis said the current skirmish was another reason that the young industry needed a set of agreed-upon standards for measurement. “We struggle with this on a daily basis,” he said, adding that he tried to use multiple sources of data. “Industrywide, we need to solve this,” he said.